Demystifying Pricing Strategies

Demystifying Pricing Strategies

There are so many factors that go into properly pricing a product or service. You have to consider how much it costs you, what the value is, what your profit margin should be and so on. The right price should ensure that you make money while they customer feels that they paid the right amount for what they received. This will go over a few ways to help you create a proper pricing strategy for your business.

Pricing Higher or Lower

Unless you are creating a new market entirely, you will encounter competitors selling similar products and different prices. Many entrepreneurs are then tasked with pricing either higher or lower than their competitors and both have their pros and cons. Pricing higher requires that you sell value. Your product must exceed theirs in order to justify the higher price.

You could also sell lower. This means either simplifying the product so that it’s easier to produce or taking a hit on your profits. You might sometimes find yourself in a place where this is necessary, but make sure that you don’t price too low.

Sell Value

If you sell a product, then you’re making low margins. If you sell value, then you can make margins of 50 percent or more. Huge companies like Microsoft have mastered this strategy and consistently make over 75 percent margins on their products. That’s because their services and programs are seen as essential for many people. Many entrepreneurs have a hard time with this if they are just entering the market, but selling value is the best way to boost your prices.

People buy on perception. If people see your product as valuable, then they’ll be happy to get it at any price. Learn this and you can charge much higher prices and still keep people happy.

High and Low Strategies

Many businesses have high-low or high-free pricing strategies that work quite well. In either case, you bring people in with low-priced or free items and then sell higher priced items to make more profit. You can see high-low with most fast food restaurants and online outlets. People are attracted to the low-priced items, but many of them will leave with premium items with significantly higher margins.

This is a great way to get people in the door. Your low-priced items should still bring in a profit, but you’ll make more from your premium items. Just look at the biggest fast food restaurants and you can see how powerful this strategy is.

Pricing Programs

Pricing software is essential for finding the right price. This type of program is intuitive and able to analyze different prices you use and how people react to find the exact best price for your products. This can also help you determine your costs based on materials, manufacturing, shipping and more. All of these figures can be dynamically changed through the program so that your price is always at the best position.

Not only that, but these programs can be used throughout the company. An associate can easily access the newest price lists when they’re speaking with buyers. This helps them create accurate quotes with buyers and often makes it easier to connect with managers to approve discounts. This will help you dominate the market rather than wasting time trying to figure out the right price on your own.


Pricing strategies can be difficult because charging the right amount is key to ensuring profits and keeping people happy. Following these tips and using a pricing program can help you hit that sweet spot where everyone is happy.


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